Sunday, August 18, 2013

Putin's trade war; how will 'kham*' respond?

During his visit to Ukraine a few days ago, at a round table discussion with the odious Viktor Medvedchuk, president Putin declared that 'Ukraine's economic recovery is only possible with the help of Russia'.

The first shots of the current trade war against Ukraine indicate Putin intends to demonstrate this in practice.

Dmitriy Korneychuk in his 'Liga.net blog entited: "Putin's trade war: a demo-version of life without Russia", explains Putin's motives.

Putin wants to show everyone that Russia will not tolerate any public humiliation of his leadership; he will always assert Russia's interests; he will always provide 'an adequate response' to those he perceives as enemies.This message is intended for both for Ukraine and the West, and for the Russians themselves, including Putin's entourage, who may be thinking that the leader is getting old and showing weakening resolve.

Second, he want to give Ukraine a demo-version of what relations with Russia would be like after any possible signing of an Association Agreement with the EU. If the AA deal is not signed in November Putin will claim the biggest foreign policy victory for Russia since Ukraine's rejection of membership of NATO, or since the signing of the punitive 2009 gas agreements.

Third, the Kremlin's actions bolsters pro-Russian forces in Ukraine. Some even claim they intend to create a powerful pro-Russian political force in Ukraine and put forward their own candidate in the 2015 Ukrainian presidential elections.

Fourth, Moscow is pursuing its strategic gas interests. The 40% reduction on the purchase of gas by Ukraine, its biggest customer for gas, in the first six months of 2013 has seriously alarmed Gazprom. The creation of gas consortium to manage the Ukrainian gas transit system in exchange for cheaper gas has shown little sign of progress even though Russia claims all the documents are 'ready to go'.

But in these days of 'just-in-time' deliveries, such a trade war will very quickly impact Russian manufacturers who depend on Ukrainian suppliers, so Putin has to be selective on the imports he targets.

There are opinions all of this might be just a pseudo trade war, trumped up by the RosUkrEnergo group, their Russian associates and Dmitriy Firtash in their battle with the president's circle.

But Putin's latest manoeuvres will obviously not go unnoticed in Europe's capitals. It will strengthen the EU's resolve to ensure Yanukovych 'does his homework' and makes progress in satisfying the EU's conditions which were set in order for Ukraine to prove it be considered a suitable partner for the AA. There have been rumours recently that the EU had been going soft on these conditions, even no longer viewing Tymoshenko's release abroad as a 'sine qua non'..

So far, the Ukrainian authorities' response to this developing trade war has been unfocussed - they look disorientated even though it has been brewing slowly but steadily since February.

Since coming to power, Yanukovych has been more interested in destroying his greatest political rival, Yulia Tymoshenko than acting firmly and renegotiating from scratch the ruinous gas deal she was forced to make under great duress in 2009 with Putin. This may have been interpreted by the Kremlin as weakness on Yanukovych's part..

Yanukovych, particularly with his criminal gangland background, should instinctively know he now has to respond resolutely and cannot be seen to cower..He is also aware that if he concedes to Putin and joins the Eurasian Customs Union with Russia, Belarus and Kazakhstan, rather than clinching the AA deal, he will always have to give way to Putin in the future..And his political future becomes more unpredictable.

An interesting Autumn awaits...

*kham was Yanukovych's 'handle' when in prison. It means lout or boor..